Recently you may have heard more about the availability of Hospital and Doctor indemnity insurance,1 also called fixed indemnity insurance. That may have led you to ask, “What is indemnity insurance?”
A fixed indemnity plan pays a certain predetermined amount for specific, covered health care expenses without your having to pay copays or out-of-pocket deductibles. Under a fixed indemnity health insurance plan, you (or the provider you choose) will be paid directly the amount specified in your plan for a particular service.
Often, fixed indemnity plans differ from major medical plans, which require you to meet deductibles, copays and coinsurance payments before the insurance company takes over to pay what’s left of your costs.
In what other ways is an indemnity plan different? A look at some key terms can help.
An authorization by the insured party stating that the insurance company may pay claims directly to a third party (doctor, hospital, etc).
Benefits are the services covered under a health insurance plan.
As with other types of insurance, indemnity plans exclude some services, so check any plan before you buy to make sure it covers what you want. Take note, most indemnity insurance plans exclude payment for any service related to a preexisting condition.
In major medical plans, coinsurance is the percentage of your medical expenses you’re required to pay after meeting your deductible. For example, if you have a $100 doctor’s bill and your coinsurance is 20/80, you would pay 20% of that $100, or $20. The insurance company pays the other 80%.
A copay is a fixed amount you pay for a certain service. For example, you may have a $40 copay for a doctor’s visit. Copays do not usually count toward your deductible.
Your deductible is the amount you owe for covered services before your health insurance plan begins to pay. If your deductible is $1,000 for the year, your insurance company will not start paying until you’ve paid that $1,000.
Some plans may feature a deductible that differs from a normal “deductible.” Instead of your paying a certain amount before insurance covers anything, you choose a deductible amount to reduce from your benefits in exchange for a lower premium paid up front.
First dollar coverage means you are paid your benefit first, without having to meet a deductible or coinsurance payment.
Guaranteed issue health insurance plans do not turn customers down for coverage based on any preexisting conditions, health issues, or illnesses the client may have. Per the Affordable Care Act, also known as Obamacare, all minimum essential coverage/major medical health plans must be guaranteed issue.
A health care network includes all the health care providers and hospitals that work with a health insurance company to care for members of a certain health plan at a discounted rate. Because of these discounts, it is generally more affordable to see an in-network health care provider.
Open Enrollment is the period of time during which individuals can choose a major medical health insurance plan for the upcoming year.
In health insurance, your out-of-pocket costs are the costs you are responsible for paying, things like copays, deductibles and your share of coinsurance.
1 THIS PLAN PROVIDES LIMITED BENEFITS. This is a supplement to health insurance and is not a substitute for the minimum essential coverage required by the Affordable Care Act (ACA). Lack of major medical coverage (or other minimum essential coverage) may result in an additional payment with your taxes.